FOREX: USD/JPY Testing Weekly Lows, Safe Havens Rally On Fed Easing Expectation

The USD has remained on the backfoot through the first part of Friday trade. The BBDXY index last near session lows sub 1227 9off 0.25%). Focus remains on whether the Fed will cut by 50bps next week, when it is widely expected to commence its easing cycle. 

• Market pricing has given greater likelihood to such a move since media articles (WSJ/FT) from US trade Thursday suggested a 25bps versus 50bps cut was a close call. Speaking in Singapore today, ex Fed NY head Bill Dudley stated there was a strong case for a 50bps cut at the September meeting.
• US yields are weaker across the key benchmarks, led by the front end. The US 2yr yield was last at 3.58%, close to recent lows).
• Such a backdrop has benefited the safe havens, with yen outperforming. USD/JPY got to 140.65 in recent dealings, fresh lows back to last Dec last year. We are around 0.70% stronger in yen terms now (140.80/85). CHF is up around 0.25%, USD/CHF last under 0.8500.
• Equity sentiment has been mixed, despite the positive US/EU lead from Thursday trade. Japan equities weighed by the stronger yen. US equity futures are close to flat.
• This has likely helped keep AUD and NZD relatively steady. AUD/USD last in the 0.6725/30, NZD at 0.6185.
• Looking ahead, we have the BoE inflation survey, ECB speak from Lagarde, while in the US we trade prices and the U. Mich. Sentiment reading.